Copper rises as support for Chile's striking miners gains momentum

New York/London: Copper prices ended higher on Friday as potential supply threats in Chile added to bullish prospects of a stronger demand outlook next year and further investment money flows into the broader commodity complex.

Copper for December delivery on the New York Mercantile Exchange's Comex division ended up 2.70 cents at $3.1080 (Dh11.38) a pound, well within striking distance of this week's 14-month peak of $3.1720.

On the London Metal Exchange (LME), benchmark copper was untraded at the close but last bid at $6,845 from $6,790 a tonne on Thursday. The metal used in power and construction climbed to $6,992 a tonne earlier this week, its highest level since late September.

Copper maintained its momentum near this week's highs after reports surfaced that Chile's Federation of Miners threatened to halt output at mines owned by BHP Billiton, in an effort to show solidarity with a strike at the company's Spence copper mine, now in its 39th day.

Striking workers at the Spence mine agreed to resume wage negotiations with BHP Billiton on Friday.

"We don't know how these negotiations will go, but I think the risk is there for significantly tighter markets from the supply side," said Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto.

Catherine Virga, senior base metals analyst with CPM Group, believed the momentum from the Spence strike alone would not be enough to forcefully drive copper prices above the $7,000 per tonne level.

"However, support from Chile's Federation of Miners or a strike at Antamina could easily send copper prices up towards $7,250," she said. "Depending on the longevity of this disruption, prices could make a run even higher."

Furthermore, government fiscal packages — especially in China, the world's largest consumer of industrial metals — are expected to start feeding through into real demand next year.

"The demand outlook for next year is very positive," said Gayle Berry, an analyst at Barclays Capital. "We're just getting the early feeling of what it's like for this fiscal spending to really feed through."

Barclays Capital said a record $60 billion will have poured into commodities by the end of this year.

Industrial metals, alongside other commodities, have been underpinned by a falling dollar, which makes metals priced in dollars cheaper for holders of other currencies, and by fund flows as investors look to rebalance their portfolios.

But rising stocks of copper in LME warehouses — above 420,000 tonnes, up more than 60 per cent since the middle of July and the highest since April — have dampened sentiment.